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What you pay every day for defending Australia

Ballooning defence spending over the coming years will be a major challenge for the new federal government, with many big-ticket projects eating up billions of dollars.

The warning comes in the Australian Strategic Policy Institute's (ASPI) annual report released this week on military spending.

Australia's defence budget for the 2021-2022 financial year was $48.6 billion, or 2.11 per cent of GDP.

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The figure – which included the Department of Defence and the Australian Signals Directorate – equates to a daily cost of $133,191,781, the report said.

National security was a major issue during this year's federal election campaign, with the former Coalition government accusing Labor of being soft on defence and having a track record of cutting military spending.

'Megaprojects bring big risks'

But Labor leader and new Prime Minister Anthony Albanese insisted a government he led would increase the defence budget, with better management of expensive projects.

But that may prove a tough task for the federal government, the report said.

It said the Australian Defence Force was improving but warned of the risks in a defence budget designed around "megaprojects".

"Such projects take years or decades to design and deliver, while spending huge sums for little benefit in the short term," the report said.

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"When they encounter problems, those problems are big."

Leading those is the AUKUS agreement under which Australia will acquire a nuclear-powered submarine fleet by accessing US and British technology.

The move by the former Morrison government led to the controversial scrapping of an agreement to acquire French-designed conventional submarines.

The nuclear submarines project will cost "significantly more" than the cancelled $90 billion French project, the ASPI report said.

While the nuclear submarines, projected to enter service from 2030 onwards, had "the potential to deliver a huge step-up in undersea warfare capability", the risk of a major blowout in costs was significant.

'China can reach anywhere in region'

The report also highlighted the significant role growing Chinese assertiveness in the Pacific region was playing in shaping Australian defence planning.

It pointed to incidents over the past months involving the People's Liberation Army in our region such as its "state-of-the-art" naval surveillance ships transiting through the Arafura Sea and Torres Strait off northern Australia and the lasering of an Australian surveillance plane by a Chinese warship.

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The report said such incidents were meant to be a reminder for Australia and other countries that the PLA Navy is now the largest in the world and "can reach anywhere in the Indo Pacific".

In another display of Chinese military assertiveness, one of its fighter jets carried out an interception of a Royal Australian Air Force surveillance plane in the South China Sea last month, described this week as "dangerous" by the federal government.

Albanese showed how serious he is taking the issue of rising Chinese power by flying to Tokyo just hours after he was sworn in last month to attend the Quad summit, with the leaders of Japan, the US and India.

And soon after Foreign Minister Penny Wong began the first of two visits to the Pacific as her Chinese counterpart toured the region and signed a dozen bilateral agreements but failed to clinch a security and trade deal with 10 countries.

Wong pledged to work for better relations with Pacific countries and "make a uniquely Australian contribution" to the region.

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headline

'Win for savers': Two banks increase interest rates on savings accounts

Aussies looking to gain more out of their savings accounts are finally in luck as two banks have decided to increase the Reserve Bank's rate hike to their savings accounts.

The RBA announced on Tuesday it would lift the nation's interest rates for the second month in a row, raising the cash rate target by a larger than expected 50 basis points to 0.85 per cent.

All four major banks passed on the rate hike in full to home loan customers however the good news is some banks are setting a new standard and passing on the rate rise to savings customers too.

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Macquarie Bank and ING.

Macquarie and ING have raised interest rates on their transaction and savings accounts which finance experts are calling a big "win for savers".

Macquarie will increase the interest rate on its transaction account from 0.2 per cent to 1.5 per cent on balances up to $250,000 from June 17.

This is a substantial increase for savers as the highest rate from a big four bank on a transaction account is 0.02 per cent from ANZ on balances over $100,000.

Meanwhile, ING is also increasing its interest rate on the Savings Maximiser account by 75 basis points to 2.10 per cent on balances up to $100,000 from June 15.

ING did not pass on the RBA rate hike in May which has contributed to this big change.

Commonwealth Bank will pass on the full 0.5 per cent rate hike to its GoalSaver and Youthsaver accounts from June 17.

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So, what does this mean for you?

RateCity.com.au research director Sally Tindall said it is a sign of banks making a move to "up the ante" on the return from savings accounts for Australians.

"Finally, we have some proof that competition in the savings sector isn't dead and buried," she said.

"ING and Macquarie have reset the battlefield for savings rates in what is ultimately a win for savers."

She added this will put pressure on other major banks like Westpac, NAB and ANZ to pass on the rate hike to savings customers.

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In terms of main transaction accounts, RateCity data showed Commonwealth and Westpac don't offer any interest on their main banking accounts however NAB and ANZ respectively offer 0.01 per cent and 0.02 per cent.

Macquarie's decision to pass on interest rate rises to the main banking accounts is a "game-changer", Tindall added.

It means customers will be able to get more back for the hard-earned cash they're saving.

Tindall suggested now is the time to "shop around" for the best deals at the banks for savings accounts.

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